Infrastructure Push to Employment Creation & Problems Faced by Small Contractors

Who are small contractors?

A company delivering works & services in construction & manufacturing industry, with limited resources, usually as a sole proprietorship or simple partnership, the owner manages most of the company's key activities is a small contractor. A small contractor usually do not employ qualified personnel and the promoter is too busy with the problems of getting jobs, following up purchases of materials, supervising work on site, following up the processing of payments etc. Most small contractors prefer to maintain tight control of all aspects of the company’s operations, especially where this involves monetary transactions such as negotiating with potential clients or suppliers, or purchasing of materials. 

Advantages of small contractors

The construction industry is an important source of employment in India. It accounts for about 8 % of the total employment. Construction typically contributes 5 % to 9 % to GDP in India and provides backward and forward linkages to the rest of the economy. The construction industry as a whole is largely made up of small contractors. It provides entrepreneurial opportunities for many small contractors and plays an important role in the distribution of income. Due to the considerable variation in construction demand, contractors are at greater risk of changes in their working environment. Small contractors often experience difficulties in managing labour, materials, finance and equipment. They have limited capacity to influence the business environment, including the regulatory framework of the industry. In the past, public infrastructure works were carried out by government agencies using own resources or by engaging large-scale contractors. Over time, government efforts on decentralisation have shifted the responsibilities for execution of infrastructure construction works from public authority to private. However, the use of large contractors was considered economically unviable for local-level small-scale construction works.

Local infrastructure works are in fact more effectively carried out through small contractors from nearby. The use of small contractors are likely to be more labour intensive, which is an advantage, among others, as they have chosen to establish their operations and business where the infrastructure is located. Some other advantages include rapid and less costly mobilisation of services, engaging local labour, local procurement of materials and equipment, long-term working relationships with local clients, and having the reputation of protecting the interests of local communities. 

Their present problems

During present infra push in the country, construction & infrastructure industry are facing an acute labour shortage of about 25 percent as rural-to-urban migration of labours is probably at one of its lowest ebbs. The main reasons for poor labour migration are (i) Government spending on various welfare and rural development projects. This has started a trend of reverse migration. Higher rural spending has allayed the need for people to migrate immediately to urban centres, (ii) Millions of people moved back to agricultural sector; this translates to a 3% net rise in the share of workers in agriculture, Money transfers to farmers, and even free food distribution helped people stay back, (iii) Labour force are reluctant to move away from families to construction project due to the pandemic, (iv) A large section of labour force are not vaccinated yet, etc.